There are many ways to divorce-proof your business

| Oct 4, 2018 | Uncategorized

Although a divorce rate in excess of 50 percent would motivate many to sign a prenuptial agreement before they marry to protect their assets, many are “hopeless romantics” who take their chances without them. Even if they have one, it may not protect future businesses that are set up after the couple marries.

Even if a spouse has a prenup, they may not be aware that any business profits that they invest in a joint bank account may invalidate it. This may make them at risk of having to split ownership rights in it with their ex if they ever do divorce.

Outside of a prenup, there are ways one spouse can protect their business from their spouse if their relationship were to ever go south. The easiest way to do this is by including a lock-out clause in your limited liability company (LLC), buy-sell, shareholder or partnership agreement. Such a clause may be written to either prohibit the transfer of voter rights or shares in the business without expressed consent of your partners.

If there’s no prenup and your business formation documents don’t contain a lock-out clause, then you’ll want to be careful about how involved you allow your spouse to become involved in your business. The more ideas that they contribute and the more that they help with its operation, the more likely a judge is to assign them increased ownership rights to your business.

This is one of the reasons that it’s important that you take a salary instead of reinvesting all profits back into the business. By doing so, it sends a message to the judge about your value in the organization. It also leaves little room for your spouse to claim that they were responsible for paying all household bills themselves.

If all else fails and it seems that you have little defense against an ex who is intent on claiming ownership rights to the business that you’ve invested your efforts into, you may benefit from negotiating a buyout settlement with them. A Kissimmee property division attorney who is well-versed in coming up with nuanced ways of dividing up complicated assets may be the best person to help negotiate a settlement in your case.

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